Buying a home is less like a sprint and more like a marathon. If you’ve successfully made an offer and chosen a mortgage, then you should congratulate yourself because you’ve almost reached your goal of homeownership.
Closing on a house is the last part of the homebuying process. It involves signing all the paperwork that officially makes you the owner of the home and legally binds you to paying your mortgage. As such, the house closing process is important to know inside and out. A mistake or oversight in this step could frustrate you for a lifetime — or at least as long as you own the home.
Here’s a detailed guide to the closing process, including how long it takes to close on a home:
- How Long Does It Take To Close On a House?
- House Closing Timeline: 9 Things To Do To Close On a House
- What To Expect at Closing
- What Can Cause Closing Delays?
- How Much Does It Cost To Close On a House?
- The Bottom Line on Average Closing Times
How Long Does It Take To Close On a House?
The average closing time on a home varies. In July, it took an average of 48 days to close a loan, according to an ICE Mortgage Technology report on origination insights. Generally, you can expect the house closing process to take between 30 and 60 days.
House Closing Timeline: 9 Things To Do To Close On a House
There are a lot of steps, paperwork, and transactions to complete when closing on a house, so let’s go through the most common components — along with how long each step can take.
1. Negotiate and sign the purchase agreement
How long it takes: Within 10 days to two weeks
One of the most important things to do before closing on a house is signing a purchase agreement for the home. The purchase agreement is made between the buyer and the seller, and describes the transaction in detail, including the home price, conditions of the sale, and the closing date. The house closing process generally starts after the purchase agreement is signed by both parties.
Unless the offer sets a deadline for signing the purchase agreement, there’s no hard-and-fast time frame for completing this step. Most offers set a deadline for about 10 to 14 days after acceptance, says Kimo Quance, a real estate agent and owner of The Kimo Quance Group in Santee, California.
Your purchase contract may contain a list of conditions that must be fulfilled before closing on a home. There are various types of contingencies, but the most common ones include:
- Appraisal contingency: The deal is contingent on an appraisal reviewing the property and confirming its fair market value. If the appraisal determines the home is worth less than the purchase price, then the buyer can back out of the deal or renegotiate it.
- Financing contingency: Closing is contingent on the buyer securing a home loan to pay for the property. If the buyer fails to line up financing, then the sale is canceled.
- Inspection contingency: The offer is contingent on the buyer being satisfied with the result of the home inspection. If the inspection finds problems, the buyer can back out of the sale or renegotiate with the seller.
Decide if you want the sellers to leave any appliances, artwork, or furniture
In general, furnishings can be a tricky area of the house closing process. While they may look like part of the house when the seller is showing the property to potential buyers, some furnishings might not come with the home.
A fixture is typically anything physically attached to the property, where removing it would damage the house. Because of this, fixtures generally come with the house, while appliances, artwork, and furniture are left at the discretion of the seller. If there are certain furnishings you want to stay, you can negotiate with the seller to include them in the sale.
2. Get approved for a mortgage
How long it takes: 30 to 60 days
Even if the buyer was preapproved for a mortgage, the loan still needs to be finalized. As a buyer, it’s smart to shop around for a mortgage to make sure you’re getting the best available deal. After you submit a mortgage application, the lender has three business days to provide a loan estimate, and then you have 10 business days to accept or reject the offer.
When you choose a lender, you may need to provide additional paperwork for underwriting. Underwriting verifies your information by taking a detailed look at your finances. Depending on the complexity of your situation, underwriting can take a few days or a few weeks. Providing the necessary documents to your lender ensures the process moves along as quickly as possible.
Once the lender approves your mortgage and sets its terms, it will schedule a closing date for the sale.
3. Open an escrow account
How long it takes: Up to one week
An escrow account is essentially a bank account managed by a third party — like the title company — to hold the buyer’s earnest money, which is a deposit you put down before closing to show the seller that you truly intend to buy. An escrow account keeps the buyer’s cash safe and protects the seller if the buyer breaks the contract.
“The title (or) escrow company is mutually chosen between buyers and sellers, generally advised by their Realtors,” says Beth Benner, a real estate broker at Living Room Realty in Portland, Oregon.
4. Get a home inspection
How long it takes: Two to four hours
Scheduling a home inspection is a crucial step, so you should set one up as soon as possible. This allows you to quickly find out if there are any major issues with the house and use the inspection contingency in your purchase agreement if you included it. If you don’t get a home inspection and you discover a serious problem down the line, you’ll have to pay for repairs yourself.
What services should you pay for during a home inspection?
A home inspection typically costs between $300 and $500, but it depends on factors such as location and the size of the house. It’s noninvasive, meaning the inspector only observes and causes no damage while examining the home. The home inspector generally looks for problems in the roofing, structure, foundation, heating and cooling systems, electrical system, plumbing, and windows and doors.
5. Lock in your interest rate
How long it lasts: 15 to 60 days
Since interest rates change, it can be a good idea to lock in the rate for your loan. Doing so gives you some protection from market fluctuations, which could cause rates to increase before you close. Rate locks are generally available for periods of 15 to 60 days. If you don’t close within the specified time frame, you’ll lose the rate lock, and your mortgage rate can change.
Keep in mind that there can be drawbacks to a rate lock. Just as interest rates may go up, they may go down as well. If you’re locked into your mortgage rate, you could miss out on a lower rate if overall interest rates decline.
6. Have the home appraised
How long it takes: Two days to one week
Getting an appraisal ensures that the buyer’s mortgage amount is appropriate for the home’s market value. It’s a common contingency that must be met for a sale to close, and usually required by the lender. The home appraisal is conducted by a licensed, third-party appraiser who has no connection to the buyer, seller, or lender, and typically costs $300 to $600.
7. Buy insurance
How long it takes: Up to a few days to get approved by the insurer
You’ll likely face a couple of different insurance charges when closing on a home. There’s homeowners insurance, which provides liability coverage and protects you financially from damages to your property, as well as title insurance, which covers you and the lender against problems with the title or past claims on the home.
Homeowners insurance is usually required by lenders, and up to a year’s worth of insurance is paid in advance at the closing. Costs vary considerably depending on the home’s value, size, age, construction, and location. Not all natural disasters are covered by a standard homeowners insurance policy, so you may need to pay extra or buy a separate policy to cover damage from floods or earthquakes.
The title to a property gives you the right to own it, and is an important part of a real estate transaction. There are two types of title insurance policies: lender’s title insurance and owner’s title insurance. Both cover the insured party against losses and risks associated with the home’s previous owners, such as unpaid real estate taxes, fraud, and errors in the property’s legal documentation.
Lender’s title insurance protects the mortgage lender and is generally required to take out a home loan. Owner’s title insurance protects the buyer, is usually optional, and can be covered by either the buyer or the seller. Typically, title insurance is a one-time premium paid at the closing.
8. Perform a final walkthrough
How long it takes: Up to a few hours
With all the other steps out of the way, one of the last things you should do before signing the closing paperwork is to personally inspect the property again. Damage or other issues can occur after the home inspection but before the closing date. The final walkthrough also allows you to check that the seller has completed any negotiated repairs and left behind any furnishings that were part of the sale.
9. Get through closing day
How long it takes: Up to a couple of hours
On the closing date, the buyer and the seller sign all the paperwork that officially transfers the ownership of the property. The buyer also closes on their loan. Money in the escrow account is paid out to the appropriate parties, and the buyer receives the deed to their new home.
What To Expect at Closing
Let’s go through in detail what to expect on closing day, including the important documents you’ll be signing and the parties that will be present.
What happens on closing day?
The closing typically occurs at the office of one of the involved parties, such as the title company. Several things happen on closing day, but a big part is dedicated to signing documents.
Key documents include:
- Closing disclosure: This document outlines all the details regarding your mortgage, such as the interest rate, monthly payment, cash to close, and more. You’ll receive this document at least three business days before the closing.
- Deed of trust: This is the lender’s assurance that you will repay your loan, and allows the lender to foreclose on your home if you don’t follow the payment terms of your mortgage.
- Promissory note: This document dictates that you agree to repay the lender for the amount loaned at whatever interest rate is stated, and on the repayment schedule outlined.
“Once all docs have been executed by all parties, the closing agent can transfer all the monies, or, as we call it in the industry, ‘fund,’” says Jose Laya, a real estate broker at Berkshire Hathaway HomeServices EWM Realty in Miami Beach, Florida. “Funding is where the monies get transferred to all parties and the transaction officially is closed.”
Who is present during closing?
The closing may include all of these people or just some of them:
- The buyer’s real estate agent.
- The buyer’s attorney.
- The seller’s attorney.
- A representative from the title company.
- A representative from the escrow company.
- Someone representing the lender.
“You can actually have both parties, buyer and seller, at the closing, but I don’t recommend this,” says Shay Raja, a real estate attorney at Henderson, Franklin, Starnes & Holt, P.A., in Fort Myers, Florida. “Normally, on closing day, you want to have the seller’s docs already signed, so that the buyer can just come to closing and sign all docs, and also have the transaction fund.”
What do you need to bring to the closing?
It’s important that you bring some form of identification, such as a driver’s license or passport, and make sure it’s not expired. You should also check with your bank and be ready to pay the closing costs.
“The title company will either require a wire or a cashier’s check for the closing,” says Teresa Trigas-Pfefferle, a Realtor and broker at Keller Williams in Clinton, New Jersey. “It is also good to bring your own personal checkbook, in the case of any small changes.”
What Can Cause Closing Delays?
There can be many reasons for delay in the house closing process, such as problems related to financing, the home inspection or appraisal, or the title.
“Typically, it’s the borrower not providing documentation in time, or the wrong documentation,” says Andy Kolodgie, owner of The House Guys, a real estate investment company in Washington, D.C. “Otherwise, the lender might be moving slowly and things are not getting done in time, such as underwriting and processing. Sometimes, the title company will overbook their schedule and not allow for enough time to close.”
How Much Does It Cost To Close On a House?
Closing costs, aka settlement fees, typically range between 2% and 5% of the purchase price, according to Freddie Mac. They cover the fees charged by the parties involved in the sale, including your real estate agent and the lender.
What are common closing fees?
The loan estimate provided by the lender contains a list of what you can expect to pay in closing costs, broken down item by item. It includes the total closing costs as well as the estimated cash to close, which also factors in your down payment, earnest money, and any other charges or credits.
Your closing costs are organized into three categories: origination charges, services you cannot shop for, and services you can shop for.
Origination fees are charged by lenders for handling the paperwork involved in extending a loan. These fees are important to consider when weighing mortgage offers, because they can be negotiated.
Origination charges include:
- Application fee: This is the fee you’re charged for submitting a loan application.
- Underwriting fee: The underwriting fee covers the cost of reviewing your financial information, determining your risk of defaulting on the loan, and verifying that the mortgage requirements are met.
- Discount points: A point is a fee you can pay upfront to lower your interest rate. As a result, points add to your total closing costs but can save you money on interest in the long run.
Services you cannot shop for
Some services are required and chosen by your lender, so you can’t shop around for the cheapest prices. Here are some common charges that fall under this category:
- Appraisal fee: This is what you’re charged for hiring an appraiser to assign a fair market value to the home you’re buying.
- Credit report fee: The lender must run a full credit check on you as part of the mortgage process, so this fee covers the cost of pulling your credit report.
- Tax status research and tax monitoring fees: You must pay a company to verify the amount of property taxes you owe each year, and check that they’re paid in a timely fashion.
Services you can shop for
Other services are required by the lender but flexible in terms of providers, meaning you’re allowed to shop around for the best deals. Though these services can vary by lender, there are some common ones:
- Lender’s title insurance: This policy insures the lender against problems related to the property’s title.
- Title search fee: This fee covers the cost of a title search, which is a review of public records for the title to the property you’re buying. It helps identify any issues like unpaid property taxes.
- Pest inspection: A pest inspection looks for evidence of insects and other creatures that can damage your home or present a health hazard. With certain home loans, such as mortgages backed by the Department of Veterans Affairs, you may be required to pay for a pest inspection.
Another key category of closing costs is prepaid items, which can include homeowners insurance, property taxes, and mortgage interest. Prepaid interest charges cover the interest that accrues between the date you close on your mortgage and your first monthly mortgage payment.
Lenders can establish an escrow account to collect money from the borrower for property taxes and homeowners insurance. An initial payment into this account may be required at the closing.
The Bottom Line on Average Closing Times
Closing on a house can be a stressful experience, but it also means you’re at the end of the homebuying process. Fortunately, many parts of the house closing process — such as setting up escrow accounts, preparing the paperwork, and conducting the home inspection and appraisal — are handled by professionals. What’s important is for the buyer to understand all the responsibilities, requirements, and transactions that take place in the house buying process. Avoid signing any documents that you don’t understand or seem different from what you expected, and take as much time as you need to fully learn how to close on a house.